November 3, 2021 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________

FORM 10-Q

________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 1-32167

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VAALCO Energy, Inc.

(Exact name of registrant as specified in its charter)

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Delaware		76-0274813
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9800 Richmond Avenue Suite 700 Houston, Texas		77042
(Address of principal executive offices)		(Zip code)

(713) 623-0801

(Registrant’s telephone number, including area code)

________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock	EGY	New York Stock Exchange
Common Stock	EGY	London Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ¨ No x

As of October 26, 2021, there were outstanding 58,611,072 shares of common stock, $0.10 par value per share, of the registrant.

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VAALCO ENERGY, INC. AND SUBSIDIARIES

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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets
September 30, 2021 and December 31, 2020	2
Condensed Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2021 and 2020	3
Condensed Consolidated Statements of Shareholders’ Equity
Three and Nine Months Ended September 30, 2021 and 2020	4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2021 and 2020	5
Notes to Condensed Consolidated Financial Statements	7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	39
ITEM 4. CONTROLS AND PROCEDURES	40
PART II. OTHER INFORMATION	40
ITEM 1. LEGAL PROCEEDINGS	40
ITEM 1A. RISK FACTORS	40
ITEM 6. EXHIBITS	42

Unless the context otherwise indicates, references to “VAALCO,” “the Company”, “we,” “our,” or “us” in this Quarterly Report on Form 10-Q are references to VAALCO Energy, Inc., including its wholly-owned subsidiaries.

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)



	As of September 30, 2021		As of December 31, 2020
ASSETS	(in thousands)
Current assets:
Cash and cash equivalents	$	52,839	$	47,853
Restricted cash		81		86
Receivables:
Accounts with joint venture owners, net of allowance of $0.0 million in both periods presented		1,050		3,587
Foreign income taxes receivable		2,056		—
Other		86		4,331
Crude oil inventory		2,556		3,906
Prepayments and other		5,416		4,215
Total current assets		64,084		63,978

Crude oil and natural gas properties, equipment and other - successful efforts method, net		74,102		37,036
Other noncurrent assets:
Restricted cash		1,752		925
Value added tax and other receivables, net of allowance of $5.8 million and $2.3 million, respectively		5,670		4,271
Right of use operating lease assets		12,984		22,569
Deferred tax assets		24,211		—
Abandonment funding		22,281		12,453
Other long-term assets		1,176		—
Total assets	$	206,260	$	141,232
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	8,433	$	16,690
Accounts with joint venture owners		2,325		4,945
Accrued liabilities and other		39,857		17,184
Operating lease liabilities - current portion		12,671		12,890
Foreign income taxes payable		—		860
Current liabilities - discontinued operations		7		7
Total current liabilities		63,293		52,576
Asset retirement obligations		33,077		17,334
Operating lease liabilities - net of current portion		312		9,671
Other long-term liabilities		—		193
Total liabilities		96,682		79,774
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred stock, $25 par value; 500,000 shares authorized, none issued		—		—
Common stock, $0.10 par value; 100,000,000 shares authorized, 69,528,100 and 67,897,530 shares issued, 58,588,777 and 57,531,154 shares outstanding, respectively		6,953		6,790
Additional paid-in capital		76,346		74,437
Less treasury stock, 10,939,323 and 10,366,376 shares, respectively, at cost		(43,847)		(42,421)
Retained earnings		70,126		22,652
Total shareholders' equity		109,578		61,458
Total liabilities and shareholders' equity	$	206,260	$	141,232

See notes to condensed consolidated financial statements.
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VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in thousands, except per share amounts)
Revenues:
Crude oil and natural gas sales	$	55,899	$	18,256	$	142,696	$	54,619
Operating costs and expenses:
Production expense		25,208		8,984		57,760		30,859
Exploration expense		479		16		1,286		16
Depreciation, depletion and amortization		6,970		2,212		16,928		8,116
Impairment of proved crude oil and natural gas properties		—		—		—		30,625
General and administrative expense		2,940		2,178		12,221		5,951
Bad debt expense and other		318		151		814		1,140
Total operating costs and expenses		35,915		13,541		89,009		76,707
Other operating income (expense), net		46		(37)		(440)		(883)
Operating income (loss)		20,030		4,678		53,247		(22,971)
Other income (expense):
Derivative instruments gain (loss), net		(5,147)		—		(21,070)		6,583
Interest income, net		3		23		9		150
Other, net		(328)		147		4,088		163
Total other income (expense), net		(5,472)		170		(16,973)		6,896
Income (loss) from continuing operations before income taxes		14,558		4,848		36,274		(16,075)
Income tax expense (benefit)		(17,183)		(2,759)		(11,272)		28,470
Income (loss) from continuing operations		31,741		7,607		47,546		(44,545)
Income (loss) from discontinued operations, net of tax		(20)		11		(72)		(41)
Net income (loss)	$	31,721	$	7,618	$	47,474	$	(44,586)

Basic net income (loss) per share:
Income (loss) from continuing operations	$	0.53	$	0.13	$	0.81	$	(0.77)
Loss from discontinued operations, net of tax		0.00		0.00		0.00		0.00
Net income (loss) per share	$	0.53	$	0.13	$	0.81	$	(0.77)
Basic weighted average shares outstanding		58,586		57,456		58,102		57,628
Diluted net income (loss) per share:
Income (loss) from continuing operations	$	0.53	$	0.13	$	0.80	$	(0.77)
Loss from discontinued operations, net of tax		0.00		0.00		0.00		0.00
Net income (loss) per share	$	0.53	$	0.13	$	0.80	$	(0.77)
Diluted weighted average shares outstanding		58,916		57,741		58,654		57,628

See notes to condensed consolidated financial statements.
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VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)


	Common Shares Issued	Treasury Shares	Common Stock		Additional Paid-In Capital		Treasury Stock		Retained Earnings		Total
	(in thousands)
Balance at January 1, 2021	67,897	(10,366)	$	6,790	$	74,437	$	(42,421)	$	22,652	$	61,458
Shares issued - stock-based compensation	431	(155)		43		304		—		—		347
Stock-based compensation expense	—	—		—		323		—		—		323
Treasury stock	—	—		—		—		(403)		—		(403)
Net income	—	—		—		—		—		9,869		9,869
Balance at March 31, 2021	68,328	(10,521)		6,833		75,064		(42,824)		32,521		71,594
Shares issued - stock-based compensation	1,092	(314)		109		597		—		—		706
Stock-based compensation expense	—	—		—		117		—		—		117
Treasury stock	—	—		—		—		(765)		—		(765)
Net income	—	—		—		—		—		5,884		5,884
Balance at June 30, 2021	69,420	(10,835)		6,942		75,778		(43,589)		38,405		77,536
Shares issued - stock-based compensation	108	(104)		11		241		—		—		252
Stock-based compensation expense	—	—		—		327		—		—		327
Treasury stock	—	—		—		—		(258)		—		(258)
Net income	—	—		—		—		—		31,721		31,721
Balance at September 30, 2021	69,528	(10,939)	$	6,953	$	76,346	$	(43,847)	$	70,126	$	109,578

Common Shares Issued

Treasury Shares

Common Stock

Additional Paid-In Capital

Form: 10-Q

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